Bridgestone

1.) 70%

2.) A high WACM indicates that Bridgestone puts .70 of each $1 sold towards covering fixed expenses. A closer look at WACM shows that there is a wide variation of contribution margin percentage among the 10 services provided at Bridgestone. When projecting revenues and comparing actual versus budget, the service revenue mix is pivotal to the overall contribution margin.

3.) Bridgestone’s Plan shows that the company should break-even/make a modest profit next year. While the budget shows this, there are some major areas for concern. The Service Revenue Mix is an important factor as Bridgestone is budgeting that 80% of the Revenue will consist of the six services that average an 81% contribution margin, while the other 20% or revenue only averages a 21% contribution margin.

4.) The Margin of Safety with Bridgestone’s Plan for Next Year is very minor and does not even account for a percentage of budgeted sales. This means that Bridgestone is at great risk for not breaking-even next year as it has little room for fluctuation in budgeted revenue or fixed expenses.

5.) Decreasing Bridgestone’s discretionary fixed expenses by 10% would decrease the breakeven Revenue from $4,991,000 to $4,605,138. This decrease in breakeven revenue due to discretionary fixed expense reduction results in a Margin of Safety of $385,861 on $5,000,000 in Revenue (7%).

6.) Lab Urinalysis, Group Counseling, and Individual Counseling all deserve extra attention as they provide 21%, 20%, and 28% of the total contribution margin. These services are very important to the overall profitable as they have high budgeted contribution margins and budgeted units of service. It is worth noting as well that extra attention should be paid to Ambulatory Detox as it provides a 52% contribution margin and is unique as its primary units of service come from the State and not Medicaid. There may be a higher variation in units of service, favorable or unfavorable.

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